Coleco rode Cabbage Patch Kids to $500M — then the Adam computer crashed the company

Coleco began as the Connecticut Leather Company in 1932 and spent decades making above-ground swimming pools and Pong clones. Then in 1982, it struck gold twice. The ColecoVision game console sold 560,000 units in its first year, powered by the exclusive Donkey Kong. In 1983, the Cabbage Patch Kids dolls became a national craze — the hottest toy of the Christmas season. Coleco's revenue nearly tripled to $500 million.

Buoyed by this success, Coleco rushed to enter the home computer market with the Adam. The Adam was an all-in-one system: a word processor, a daisy-wheel printer, and a computer, priced at $725. But the system was plagued with bugs. The tape drive was unreliable, the software had glitches, and the printer frequently broke. Consumers returned the Adams in droves. The home computer market was already in a price war between Commodore, Atari, and Texas Instruments, and the Adam could not compete. By early 1985, Coleco had withdrawn from electronics entirely.

Coleco then made another mistake: it spent $75 million to acquire Selchow & Righter, the maker of Scrabble and Trivial Pursuit, just as demand for those games was peaking and about to decline. With the Adam computer a write-off, Cabbage Patch Kids cooling off, and the board-game acquisition failing, Coleco was out of options. It filed for Chapter 11 bankruptcy in 1988. Hasbro bought most of its assets in 1989. The company that had owned Christmas in 1983 was gone five years later.